What is Value Engineering?
Value engineering (VE) is a creative, systematic approach to providing the essential functions of a project at the best value. Successful VE results are achieved through an open, collaborative review of the project that considers life cycle costs, performance, quality, reliability, and safety. VE is one of the many benefits that collaborative-delivery methods such as CMAR, design-build, and progressive design-build offer to project owners.
Benefits of Value Engineering
The main goal of VE is to provide owners with a system that has the same functionality at a reduced cost; however, there are additional benefits. The VE process promotes collaboration among the entire project team during preconstruction when relationships between the contractor, engineer, and owner are being developed. VE requires a high level of communication between all parties to quickly vet ideas and implement changes. This process establishes lines of communication that last throughout the project and helps build trust among the project team. Establishing the owner’s needs up front helps ensure their critical requirements are not negatively affected. In addition to the team building aspects, VE can reduce the duration of a project by eliminating scope or altering means and methods to improve constructability. Risk can be also be reduced by removing scope or clarifying expectations for ambiguous scopes. The benefits of VE make it a key component of the collaborative-delivery process.
Pitfalls of Value Engineering
The main pitfall of VE is time. If long lead materials or equipment are being modified through the VE process, the project team needs to make decisions quickly to avoid procurement delays. It is important to identify time-sensitive elements of long lead items, such as shop drawing lead time, fabrication time frames, and manufacturer’s backlog early in VE discussions to avoid procurement delays. Design revisions associated with VE ideas can also impact the project schedule. If design revisions are not executed quickly, it can change the contractor’s sequence of construction or push non-critical work onto the critical path. Another pitfall with VE is that, if taken too far, it can result in minor changes with minimal cost benefit. The VE process takes time and effort from all parties to implement successfully. The project team can get bogged down with reviewing small changes that don’t provide significant cost savings. Setting a minimum value threshold for VE ideas can help prevent this from happening. These pitfalls can be avoided by effectively managing the VE process.
Managing the VE Process
Effective management of the VE process starts with the project team establishing guidelines. The contractor and owner should determine how savings will be shared before proceeding with any further VE efforts. Once this is accomplished, the key decision-makers from each party need to be identified. Communication protocols should be established for how VE ideas will be distributed, analyzed, and approved. Clear communication is critical throughout the VE process, and it is vital that all parties understand the flow of information and the decision-making process. It is also important to identify design features that are off limits for VE discussion, such as design elements that the owner has specifically requested.
Once the guidelines have been established, it’s time to get creative. VE ideas can be proposed by any party but are typically initiated by the contractor. The contractor should manage the construction schedule throughout the VE process to establish deadlines for reviews, approvals, and implementation. Deadlines need to be clearly communicated and agreed upon by the project team to prevent delays. All VE ideas should be tracked and discussed with the project team on a regular basis. Ideas that do not gain traction or could adversely impact the schedule should be abandoned. Any approved ideas should be documented and distributed to all appropriate parties.
Case Study: West Villages Southwest Wastewater Reclamation Facility
Project Team: West Villages Improvement District (owner), City of North Port (end user), Kimley-Horn (engineer), Garney Construction (CMAR)
Project Value: $38 million
The Southwest Wastewater Reclamation Facility is a greenfield plant in North Port, Florida. Garney was selected as CMAR for this project at 60% design and encountered some unique challenges with value engineering:
- There were two owners on this project – West Villages Improvement District was the financier and the City of North Port was the end user. VE ideas had to be approved by both parties before they could be implemented. Garney worked closely with the project team to ensure the cost reductions sought by West Villages did not impact the City’s preferred design elements.
- This was a fast-track project with a 20-month duration from Notice to Proceed to Substantial Completion and an incentive to complete three months early. All time-sensitive, post-bid VE ideas were analyzed and approved within the first three months of the project to prevent any delays.
- The final guaranteed maximum price (GMP) was above the engineer’s original estimate. Garney’s proposed VE changes reduced the cost of work by more than $500,000 without impacting the function of any treatment systems. Changes included reducing the amount of rebar in structures, changing conduit materials, changing variable frequency drives to soft starts, and deleting WiFi antennas.
VE is a significant feature of collaborative-delivery methods, with major benefits to the owner and the rest of the project team. When implemented effectively, this tool reduces cost, improves schedule, and strengthens relationships among the project team.